Agrees to $24.4B deal to go private, piles on $15B in debt in process.

Dell announced today that it has completed the terms of a deal that will take the company private, buying out stockholders at $13.65 a share in a $24.4 billion deal partially bankrolled by Microsoft. When the deal is complete, the company will be owned by a small group of private investors led by Dell CEO and founder Michael Dell and the investment firm Silver Lake.

The deal, according to the company, has been in progress since August of 2012, when Michael Dell first expressed an interest in taking the company private to Dell's board of directors. The board then formed a "Special Committee" to oversee negotiations.

For stockholders, the deal will pay out a 35 percent bonus over where Dell's stock price was as of January 11, before word of a possible deal leaked out and drove the stock price up. But the deal also includes a "go shop" provision that gives the company 45 days to solicit other interested parties for better offers.

Microsoft put up a $2 billion loan to finance the deal rather than taking a stake in the company itself. Michael Dell put in his own cash and his 14 percent stake in the company, and additional cash is coming from Silver Lake's investment funds and from Michael Dell's investment group MSD Capital, LP, as well as from the company's own cash on hand. The rest is being financed by $15 billion in debt from a raft of banks: BofA Merrill Lynch, Barclays, Credit Suisse, and RBC Capital Markets.

Just what influence Microsoft's stake in the financing of the deal gives the company in the operation of Dell after the deal is completed isn't clear—nor is it clear what the terms of the debt are—though those should be reported when the transaction is complete.

Update: The Wall Street Journal has obtained a copy of a memo sent by Michael Dell to his employees:

Today, we announced a definitive agreement for me and global technology investment firm Silver Lake to acquire Dell and take it private.

This transaction is an exciting new chapter for Dell, our team and our customers. We can immediately deliver value to stockholders, while continuing to execute our long-term growth strategy and focus on helping customers achieve their goals.

Together, we have built an incredible business that generates nearly $60 billion in annual revenue. We deliver enormous customer value through end-to-end solutions that are scalable, secure and easy to manage, and Enterprise Solutions and Services now account for 50 percent of our gross margins.

Dell’s transformation is well underway, but we recognize it will still take more time, investment and patience. I believe that we are better served with partners who will provide long-term support to help Dell innovate and accelerate the company’s transformation strategy. We’ll have the flexibility to continue organic and inorganic investment, and grow our business for the long term.

I am particularly pleased to be in partnership with Silver Lake, a world-class investment firm with an outstanding reputation and significant experience in the technology sector. They know all the technology business models, understand the value chain and have an extremely strong global network of contacts. I am also glad that Microsoft is part of the transaction, further building on a nearly 30-year relationship.

I am honored to continue serving as chairman and CEO, and I look forward to working with all of you, including our current senior leadership team, to accelerate our efforts. There is much more we can accomplish together. I am committed to this journey and I am grateful for your dedication and support. Please, stay focused on delivering results for our customers and our company.

There is still considerable work to be done, and undoubtedly both challenges and triumphs lie ahead, but as always, we are making the right decisions to position Dell, our team and our customers for long-term success.

130 Reader Comments

I was never a huge dell fan, hopefully this works out well for Microsoft and Dell. Maybe they can work on making premium hardware, something dell has struggles with in the consumer space. Their servers and storage options for enterprise are a good deal. Here's to hoping it comes to consumers.

How does Michael Dell "pay" anyone with shares when the company is going private? I understand at the moment they have a monetary value attached to them, but how does that translate into money that can be used to purchase other peoples' shares? Is he taking out a private loan with a bank against those shares?

I'm sure the fact that the Microsoft investment is a loan, and that they have made great pains to point out that it's a loan on both the Dell and Microsoft side, probably means that Microsoft does not get a seat on the board or any voting shares

How does Michael Dell "pay" anyone with shares when the company is going private? I understand at the moment they have a monetary value attached to them, but how does that translate into money that can be used to purchase other peoples' shares? Is he taking out a private loan with a bank against those shares?

That's not how it works. He's basically not requiring a cash payment for his 16% of the shares, so, they are getting that portion of the outstanding stock "free"....he's just converting those shares into shares of the new private company.

He is rolling in some of his own cash to buy additional shares separately, though.

I'm sure the fact that the Microsoft investment is a loan, and that they have made great pains to point out that it's a loan on both the Dell and Microsoft side, probably means that Microsoft does not get a seat on the board or any voting shares

I hope you are right. I would hate for anything to change Dell's support of Linux in the server room.

How does Michael Dell "pay" anyone with shares when the company is going private? I understand at the moment they have a monetary value attached to them, but how does that translate into money that can be used to purchase other peoples' shares? Is he taking out a private loan with a bank against those shares?

From the story the ownership group is borrowing a bunch of money from banks to buy the company. What I do not know is, do current stock holders have to sell there shares? I owned shares in a company that got bought out, and I just got a set of new shares in the mail and a check to cover the partial shares. Based on this I assume they do have to take the money, unless they sue for a higher buy price.

What I do not know is, do current stock holders have to sell there shares? I owned shares in a company that got bought out, and I just got a set of new shares in the mail and a check to cover the partial shares. Based on this I assume they do have to take the money, unless they sue for a higher buy price.

Yes, you have to sell your shares. Your brokerage will do it for you - after the sale all your shares of Dell stock will disappear from your account and you'll have cash instead. I guess if you held your own stock certificates you could maybe hold on to them, but they wouldn't give you any voting rights and there'd be no dividends paid on them. You'll probably have to return them to the Dell treasury department and they'd cut you a check.

You could also sue if you thought the value is too low, but the 45 day clause for other buyers to come forwards would make that a pretty fruitless attempt.

How does Michael Dell "pay" anyone with shares when the company is going private? I understand at the moment they have a monetary value attached to them, but how does that translate into money that can be used to purchase other peoples' shares? Is he taking out a private loan with a bank against those shares?

That's not how it works. He's basically not requiring a cash payment for his 16% of the shares, so, they are getting that portion of the outstanding stock "free"....he's just converting those shares into shares of the new private company.

He is rolling in some of his own cash to buy additional shares separately, though.

In recent times Wall Street has punished companies that try to plan for the future instead of the next quarter. The PC industry is in a lot of flux, and Dell needs to be able to focus on transitioning that without being hammered for not delivering that very minute.

If all they do is stop selling 7 versions of identical products in 4 different spots on their website for 13 different prices they'll be in much better shape. Dell laptops are fine but buying from them is a nightmare.

I think it's pain. 15 Billion debt even over 5 years is crippling. They had less than 500 mil in profit. Where does the other 2.5 billion come from without even going into interest and fees.

I would sell if I were a shareholder. Get out while the gettin's good.

They obviously want to change direction of the company and wants to not have to deal with shareholders. They want to get into enterprise bumping up into IBM and HP stalwarts. Sell off the computer business, might get a billion maybe for it? All the changes would cut that by half.

Looks like a brutal deal. Much like AMD's purchase of ATI, the debt choice was insane.

I don't see a win unless it is for fees and bankruptcy in the end. Which is only a win for the people getting the fees and not for society or any else involved.

Microsoft now has a first tier OEM and Dell now can stop pandering to Wall Street's demands. MS wants a partner in the consumer space and Dell needs to shed costs -- this could work out well for them both.

MS likely would have tried this route long ago, if they weren't afraid of the DoJ

Sean Gallagher / Sean is Ars Technica's IT Editor. A former Navy officer, systems administrator, and network systems integrator with 20 years of IT journalism experience, he lives and works in Baltimore, Maryland.